technotrans SE (TTR1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for joining our webcast on the results of the first quarter 2025 of technotrans. My name is Frank Dernesch, and I'm Head of Investor Relations and Treasury. I'm delighted to be joined by our CEO, Michael Finger; and our CFO, Natascha Sander. This morning, we will cover, first, the highlights of the first quarter 2025; second, the development in our focus markets; third, the financial performance in detail; and fourth, our strategic road map and the outlook for 2025. After the presentation, the Board members are looking forward to answering your questions in a Q&A session. Please note that the following presentation contains statements on the future development of technotrans Group. These reflect the present views of the Board of Management and are based on the corresponding plans, estimates and expectations. These statements are subject to certain risks and uncertainties, which could mean that the actual results may differ considerably from those expected. With that, I am pleased to hand over to our CEO. Michael, the floor is yours. Thank you.

Thank you, Frank, and a warm welcome from me as well. I would say that we had a strong start to the year. The team did a great job of staying focused. In the first 3 months, we could grow our revenue by 7.3% up to EUR 60 million, and I assume you are still with me. The conditions are still challenging. Even more impressive, EBIT went up to EUR 4 million, which represents an EBIT margin of 6.7%. This is 10x higher than 1 year ago. We can see 2 main drivers for this. First, our successfully closed efficiency program ttSprint is paying off. Our new customer-focused organization is in place. All the services are delivered as the expected efficiency contribution. And second, of course, the increased revenue driven by volume production with associated scale effects. According to the rise in profitability, ROCE also increased significantly from 10.3% to 14.4%. The market activity was high, and it was good to see that the demand was strong throughout the quarter. In total, our order backlog climbed to EUR 80 million and the book-to-bill ratio is at 1.2, good signals for further growth. Before we move to the highlights of the first quarter, I would like to give you a heads up. We are planning a Capital Markets Day at our headquarters in Sassenberg in October to give you an update on our strategy until 2030. You will receive an invite once we know the concrete date. So what progress did we make in the first quarter? And yes, of course, we all have had tariffs on our radar screen. But if I was to pick up a few highlights from the first quarter, those would be, first of all, sales wins. We further expanded our market position in battery cooling for e-buses as announced in our press release over the course of the first quarter. We have once again received a follow-up order from a leading European electric bus manufacturer for battery thermal management systems. The order volume is in the double-digit million euro range. This is a great and important milestone for further profitable growth. The next one is about space for further growth. To cover our future capacity needs, we have signed a purchase agreement for an approximately 13,000 square meter property next to our headquarters in Sassenberg. This is the base for long-term growth in energy management. Another highlight is our successful debut on the bauma trade show in Munich this year, one of the most important trade shows for off-road vehicles. We have presented our highly flexible thermal management systems for megawatt charging for mining trucks, and we have received very positive feedback for this. As this is another strong growing area, we are planning to enter this market as well. Last but not least, our teco ci temperature control unit for plastics has been awarded as one of the best products of the category Product of the Year from the Kunststoff magazine. We are very pleased about this award as the voting is done among the leaders. In parallel, we could generate already good sales wins with this product over the course of this year. Let's take a look at the development of our markets. First of all, I'm pleased to show you that we are already generating 94% of our revenue with our core business. With the strong growth rate incoming from energy management, we are stepping up to a more balanced portfolio. This will reduce risks and strengthen our resilience. 3 out of 5 focus markets recorded an increased revenue compared to last year. This development is positive and fully in line with our expectations. Let me give you some details. Energy Management showed the highest growth in absolute terms. Revenue rose from EUR 7.6 million to EUR 9.4 million. This is an increase of EUR 1.8 million or a plus of 24%. It demonstrates our successful position with battery thermal management systems for rail and e-buses. In addition, we are in series production with our new liquid cooling systems for data centers. Energy Management represents already 16% of our group revenue. In Healthcare & Analytics, the demand for analytical systems and scanner solutions developed strong in the first 3 months. High tolerance products from our clean room are very much developing in the right direction and revenue went significantly up by 35% to EUR 4.8 million. Print continued its recovery. Revenue grew by 10% to EUR 21 million. Key drivers are still packaging, labels and digital print solutions. Plastics and lasers stayed soft as expected. These 2 markets are reflecting the current investment restraints in those industries. The situation has not changed significantly since our webcast on April 2. In Plastics, we see slight improvement. And in Laser, apart from EUV business for semiconductors, this business is still under pressure. So in a nutshell, while Laser and Plastics are still suffering, we are generating double-digit growth rates in Energy Management, Healthcare & Analytics and Print. The need for our core competence thermal management is increasing continuously. This will also be reflected in our future revenue development. Natascha will now walk you through the financials in detail. Natascha?

Thank you, Michael, and good morning, ladies and gentlemen. I'm pleased to explain the financial performance of the technotrans Group in the first quarter of the financial year '25. Before I start with the details, I would like to highlight the following. We had a strong start in the year '25 despite the still challenging geopolitical and economic environment. Let me begin with the top line. Group revenue rose from EUR 56 million to EUR 60.1 million, reflecting a growth of 7.3% compared to previous year. As Michael outlined, the positive revenue trend was driven by our focus markets, Energy Management, Healthcare & Analytics and Print. For Plastics and Laser, we continue to face investment restraints from the market. On the bottom line, EBIT reached EUR 4 million being significantly higher compared to previous year, where we start with [indiscernible]. The EBIT margin could be increased enormously by 600 basis points to 6.7%. Drivers for this outstanding performance are the growing revenues, effects from ttSprint, the optimized product mix and additional efficiency gains. In addition, restructuring costs are not having an impact this year. Let's move to the segments now. Technology revenues grew by 8.5%, up to EUR 45 million. The most significant driver of growth remains Energy Management, supported by Healthcare & Analytics and Print. EBIT of the segment turned around from a loss in previous year to EUR 1.6 million with an EBIT margin of 3.7%. Scaling effects, efficiency gains and an improved product mix had a positive impact on the earnings situation. Let's turn to Services. Revenue in Services was EUR 15.2 million, reflecting a moderate growth of 4.1% compared to previous year. On the back of higher service revenue and efficiency improvements from ttSprint, the EBIT of the segment increased from EUR 1.3 million to EUR 2.4 million. Consequently, the EBIT margin rose from 8.9% to 15.7%. The increased profitability is also reflected in ROCE, which raised from 10.3% to 14.4%. Free cash flow was negative at minus EUR 5.8 million due to a temporary increase in working capital and the purchase of land in Sassenberg. Working capital development is in particular driven by following: First, stock increased to serve order backlog and continued growth. Second, accounts receivables rose due to high sales level in March and timing. The high level of receivables have already decreased at the beginning of April. A normalization of our free cash flow is expected over the course of the year. Gross profit increased to EUR 18 million, reflecting a rise of nearly 26%. Thanks to efficiency improvement and the optimization of our product mix in the Technology segment, the gross margin improved significantly from 25.5% to 29.9% despite a slight decrease in service share. EBITDA more than doubled from EUR 2.1 million to EUR 5.8 million with an EBITDA margin of 9.6%. This positive trend is in line with our outstanding performance in EBIT. Net profit rose to EUR 2.6 million compared to EUR 0.1 million in previous year. Earnings per share accordingly increased significantly to EUR 0.37 coming from only EUR 0.01 in Q1 '24. Our equity ratio remains was 59.5% on a high and solid level. Net debt stands at EUR 25 million. With 1.09, our net debt-to-EBITDA ratio remains on investment-grade level. The financial position of technotrans remains very solid and expresses a strong credit position. Our performance underlines once again that we are on track on a very stable foundation in spite of the economic environment that remains challenging. Before I hand back to Michael, please let me close my part with a short summary. The strong start in the year demonstrates the group's resilience gained through the successful implementation of ttSprint as a market-oriented organization. However, we continue to optimize the group and increase the performance further as we explained in the last webcast. With a solid business model, the strong financial position and its skilled and motivated employees, technotrans is perfectly equipped to accelerate its profitable growth. With this said, please let me hand back to Michael for the strategic outlook and summary. Michael, please.

Yes. Thank you very much, Natascha. The financial performance in the first quarter was in line with our expectations. Our efficiency program, ttSprint is paying off, as Natascha said. We can see now the projected effects in our P&L. Our new market-driven organization is picking up speed. We are constantly winning new products. All the other sub projects, which you can see on this slide are performing in line with our expectations, and all of this will support our profit improvement over the course of this year. With an EBIT margin of 6.7%, we had a good start into 2025. Electrification, digitalization and decarbonization will drive our future growth. With thermal management, we have a critical technology, which becomes more and more important every year. We have qualified products for growing markets. With our new organization, we will be even closer to each market, and we can anticipate further trends. And with the defined measures to improve our profitability, we are prepared to face future challenges. We are future ready 2025. We've made our homework. Our strategy has changed technotrans. The earnings quality has changed. We are on track for our targets in 2025. A strategy update and the midterm goal for 2030 will be presented at our Capital Markets Day in October. Based on the good start in Q1, we confirm our guidance. For this year, we expect revenue in a range of EUR 245 million to EUR 265 million with an EBIT margin of between 7% and 9%. ROCE is expected to be in the range of 13% to 16%. And with that said, I would like to hand over to Frank to open the Q&A. Thank you very much.

Thank you, Michael. Ladies and gentlemen, that concludes our presentation. We will now open the floor for questions. [Operator Instructions] I see a question by Stefan Augustin.

So actually, just 2 short questions because we have an overall very good result. The first one is actually on the cash flow. Could you be so nice and outline how much of an investment is in the free cash flow connected to the purchase of the real estate? And the second...

Yes, sure. I can start with the cash flow. The cash out for the purchase of the land next to our facility is approximately EUR 2.2 million.

EUR 2.2 million, okay. Thank you. And the other one is then on the order intake. If we would strip out the large order for the buses, we still have a healthy book-to-bill ratio above 1 in the quarter?

That's true indeed.

And that would then also be more or less above for all the end markets. So there is not one that's particularly standing out. So how does it look like then?

Yes. So to be a little bit more precise, Healthcare & Analytics had a good start into the year, as already mentioned in the presentation. And for sure, Energy Management, good orders we have received in Q1 and the rest is a linear split over all the other markets.

Now please move ahead -- we will move ahead to Lukas Schenk.

I would like to quickly follow up on the investment topic from Mr. Augustin. We now saw EUR 2.5 million CapEx in Q1. So what should we expect for the full year?

Yes. So for the full year, we expect a range between EUR 5 million to EUR 7 million, similar on the base of last year. The purchase comes on top so that we might [indiscernible].

And then some other questions on the data center business. Let's do them also one by one. Can you give us a little bit more details about the absolute revenue and the relative figure, so the growth in Q1 for the data center business within the Energy Management?

Yes. So unfortunately, we are going not much deeper in detail at this moment in terms of revenue split in Energy Management. But as mentioned, series business has started in data center, and we are making good progress. And last year, we have announced positive order intakes in the high single-digit million euro range, and we are now capitalizing this step-by-step in our monthly turnover.

Okay. So then coming more from the quarter business to the full year business, is there some more color you can share with us in terms of the expectations for the data center business?

Yes. This is a high dynamic market, as you know. And finally, it's all about market readiness. And that's not market readiness, at technotrans it's overall market readiness for data center for the big hyperscalers, for the enterprise data centers and the mid and low-term versions. And finally, this market is still defining the right size of those big centers. And it's not a question of if it comes, it's a question of when it comes. And at the moment, we are dealing with multiple activities across the globe. And the dynamics are extremely high, and we expect, of course, more orders to come over the course of this year.

Okay. And then following on the frame contract you mentioned in the Q3 call last year. So you mentioned that you have made the frame contract with your lead customer in this area. And I think you would want to share some more details in the future afterwards. So can we expect still to get some more information about the customer and the details about this frame contract?

So at the moment, we can't share, unfortunately, any more details about our customer as everybody wants to keep it as a secret. But nothing has changed. The situation is still very positive for us and the frame contract is in place. At the moment, we are already negotiating to expand this frame contract as the volumes are expected to rise over the course of this year. And things are going all in the right direction. And once we are able to disclose more in line with the approval of our customers, we will do so.

Now I have some written questions by Stefan Maichl, LBBW. First question, can you roughly quantify the effects responsible for the increase in earnings in Q1, for example, increase in sales, product mix, efficiency program?

So regarding sales, as we have already presented during our presentation, we saw a strong start in Energy Management, in Healthcare & Analytics and in Print. And this is also reflecting our share in revenue and the performance over the course of the first quarter. And I think regarding earnings, Natascha, you may give some flavor to this.

Yes. So we reduced our headcount significantly and the impacts that kicked in, in Q3 regarding savings and personnel expenses are between EUR 800,000 and EUR 900,000. But we have to consider that we gave salary increase to our employees and that we have to increase the blue collar FTEs to serve our growing order backlog.

Thank you very much. The next question is the book-to-bill ratio of 1.2x indicates a brisk increase in orders of over 10% to more than EUR 70 million in Q1. Which focus markets contributed significantly to this?

I think we almost answered this question. It's down to Energy Management for sure, to Healthcare & Analytics and to Print. Those were the most participants from the positive order intake in the first quarter.

Okay. Thank you, Mr. Finger. Next question. Has the volatile U.S. customs policy affected customer behavior in North America in any way? How are your competitors reacting to the U.S. tariff policy?

So as I mentioned in the speech, tariffs was the main dominating topic over the course of the last weeks. We permanently screened the market, and we have been in discussions with our customers and partners and suppliers. The tariff impact for the moment is quite low for technotrans, but the consequence is nobody can foresee it. So it is such a complex market in the industry. The supply chains are having an impact. Nobody can 100% oversee how much parts from the supply chain are coming from China via Europe to the U.S. and directly and vice versa. So we will monitor this over the course of the second quarter to get a better feeling. But as now, impact is quite low, and we are in constantly dialogue with our customers and so far, so good.

Thank you, Mr. Finger. Next question from Stefan Maichl. What makes the mining market attractive for you? What competitive advantages can you exploit here? What sales potential do you expect? And is the market entry associated with high additional R&D investments or distribution costs?

A lot of questions for one single market. The mining market is a very attractive market because here, we see a high use of technology. The mining trucks in the future will drive autonomous and on a battery mode. And we have already supplied a couple of samples to this very interesting market for battery cooling, especially. So you can imagine a mining truck runs down the mine and is still using its brake energy to not overpace. And this brake energy can be used by recuperation to load the battery. And this generates a lot of density and energy, and this must be handled with the thermal management system. This is a perfect environment for technotrans and therefore, we have identified this as a very good application for us. On top of that, this is a very strong growing market, and there are analysis which shows that the mining market may grow even faster or it's a bigger market than the railway market. And we have explained or we have presented some of those activities over the course of the last year. And now after our participation on bauma trade show, we were very pleased to see the very positive feedback from our customers. And it's not only down to cooling the battery for the mining truck, we have presented on the bauma also our first cooling solution for megawatt charging. You can imagine here, we need to handle much higher cooling volumes than at batteries for passenger cars or for rails as those mining trucks are significantly bigger and megawatt charging is here key for further success. So this product was received quite well on the trade show. And with this positive feedback, we are going to invest in this market further. The question regarding R&D., to keep the long story short, it's quite okay as the ground technology, the base technology is in place, and we need to adapt it to the specific specifications in this market. And it is down to distribution costs. So it depends on the locations from our customers. In most of the cases, we are working with direct contracts. So there are no further distribution and transportation costs associated with it. But that depends on the final destination. So I hope I have covered all the questions, Frank, which Mr. Michael has raised. Otherwise, please remind me if something is missing.

Yes. No, that's perfectly fine, Michael. So let's turn again to Lukas Schenk. Mr. Schenk, I see your hand is raised. Do you have another question? No. Then let's turn to some written questions. The first one is from [ Milko Brinkman ]. He says or he asks, could you give your vision on the defense industry? Is this a possible growth market for technotrans in 2025 and '26?

Yes. Very interesting question. When we started writing on our strategy Future Ready 2025, defense was out of scope due to several reasons. But as we all know, the world has changed. Things have changed significantly on a political base as well, which have a strong impact on the economy. We will reevaluate this standpoint, and we will do this probably with potential projects we may consider for this decision. I hope this answers the question.

Thanks, Michael. Next question is by Thomas [indiscernible]. Are there any indications for an ongoing dynamic of Q1 also in the print business?

This morning, we saw some press releases from our big customers. They are all very positive in terms of order intake, which should also reflect the order intake from technotrans in Print over the course of the second quarter. And with that said, it looks like that we can continue the positive flow in Print also over the course of the second quarter.

Right. Thank you very much. Next question in written by [ Vienna Friedman ]. Can you elaborate, please, on the 2 most important products in Healthcare & Analytics?

The first very important product is, of course, our analytic device for a very big U.S. customer, which we have in series production, a high-volume series production since years. This is our bread and butter business, as you probably know. And the second one, I would say, are, of course, scanner solutions and laser products for surgeries. And of course, our blood cooling system to highlight one specific product as the second most important one, this product is picking up speed. As you know, we have supplied this in the past to the European business. We have received approval from the FDA also for the U.S. market. We have worked with our customer on a product release recently, which was also positive, and this product is gaining momentum, too. So cooling and analytic cooling units for the medical market are the 2 main products for this area.

Thank you, Michael. So I see that Mr. [indiscernible] has raised his hand. Mr. [indiscernible] welcome and your line is open.

Yes, I hope you can hear me?

Pretty well.

Okay. Maybe I'm late in the call because there are a couple of calls this morning at the same time, sorry about -- but only if I missed it maybe, but I want to ask it to get sure. Any update on the data center market? We have had some push out from an important maybe investor called Microsoft of investments, a little bit cooling off of the whole AI maybe boom, but still a lot of investments. And to my knowledge, your main customer had also evaluated a little bit the situation and maybe to find the right time to start with the new technology. Maybe any update if you have not done it before? Sorry, if I may...

No worries. Indeed, this question has been raised before. But again, so the market dynamics I've explained also in my first answer, we are still high in all directions. It's all about market readiness at the moment and defining the right scale of the data centers. The momentum technotrans is very positive at the moment. We are materializing our orders from last year into production, which are running pretty well. We are working on ramp-up plans for the future to increase our capacity based on the demand from our customers. And so in short words, nothing has changed on this. And once again, very high dynamics with very much news from big tech companies like Microsoft, as you mentioned, and many others more. And finally, we need to convert this over the course of the next 12 months into orders.

So in Q1, there have been not so much from the data center, increase in Energy Management came from electric buses.

Yes. Electric bus order has had also a significant increase. But as I said, the orders from last year are now in production and have -- they all have contributed to this positive revenue increase.

And so your investment in Sassenberg definitely done with this -- for the energy management primarily for targeting the data center market?

Yes, exactly. That is down to energy management, this investment of the space of 13,000 square meters. We need this to expand our production capacity not only for data centers, but for data centers and also for the production of battery cooling for thermal management systems for rail and buses. These are the main drivers in this area. And therefore, we need space as the size of the products are also increasing. And therefore, we need some space to handle also the logistics around that process.

We see another raised hand by Mr. Schenk. Please go ahead.

And one follow-up on the topic or on the question Mr. [indiscernible] asked concerning the increase in Energy Management. Is it fair to assume that the biggest chunk of this increase came from data center? Or was it more from the e-bus topic?

You mean in the turnover in Q1?

Yes.

Yes. So of course, the biggest chunk in turnover comes from battery management systems for rail and road, but data centers are catching up.

And in terms of the growth versus the Q1 2024?

Based on the growth rates, data centers have significantly stepped up. We have this business not in our figures 1 year ago on that level. And if you compare it to the order intake situation, of course, data centers are much more visible in Q1 compared to 1 year ago, of course.

Thank you, Mr. Schenk. As there are no questions -- does anyone want to raise a question? As there are no further questions, please let me hand back to our CEO, Michael Finger.

Thank you very much, Frank. And indeed, if there are no further questions, our next event is the AGM in Münster on May 16, where we can answer further questions. We are happy to welcome you in Münster next week. Our next reporting date for the first half is on August 18. And again, in case of any further questions, call us at any time on the usual lines. Also on behalf of my colleague, Natascha, I would like to express our thank you and trust and interest in technotrans. Thanks again for joining this call today, and take care and goodbye. Thank you very much.

Thank you. Goodbye.